Let’s talk about breaking up institutions, maybe even Evil Empires.
‘Break up the Yankees!’ How many times I heard that in my first 14 years. Two years after the 1960 Pirates proved there was no need any more to break them up, the replacement players in the old NY Giants’ Polo Grounds heard fans jeering, ‘Break up the Mets!’
In the Reagan-Bush I years ‘shareholder value’ became the all-purpose gage for defining a corporation’s worth. Companies whose stock prices didn’t hit maximum estimates became candidates for sale and break up.
Harvard professor Joseph Schumpeter in 1942 had offered the rationale: ‘Creative destruction is the essential fact about capitalism. Stabilized capitalism is a contradiction in terms.’
And so it continues, as Pensions & Investments reported on April 3, the California State Teachers Retirement System and the institutional hedge fund, Relational Investors LLC want to split the Timken Corporation into its steel and bearings components and thereby, they guess, raise its shareholders’ value by a bit over 20 percent.
A candidate in greater need of restructuring than the $5 billion, 114 year-old Timken Corp. is Harvard Inc., a real estate, investment banking and consulting firm that also offers academic degrees.
The only part of Harvard to which one can assign a value is its endowment: reportedly about $31 billion. The worth of Harvard’s other assets – real estate, art, consulting contracts, patents, rare books, copyrights, etc., etc. – is largely unreported, even unacknowledged. So, one can’t justly estimate its value after break up.
Indeed, Harvard’s worth is incalculable. Four times its endowment? Ten times? No number between $100 and $500 billion seems far-fetched.
Unquestionably, however, Harvard’s most valuable asset is its name, its status as ‘the World’s Greatest University (WGU)’ as Yalie Alex Beam has dubbed it.
Its educational end (again, a pretty small operation within Harvard, Inc.) is important for its license to raise tens of millions annually from alumni and foundations without having to do anything in particular for it apart from what it wants to do. Its cachet supports WGU’s numerous businesses, including logo licensing.
But mismanagement of WGU’s undergraduate line has made ‘Harvard’ dangerously close to a punch line.
Just focus on the last month or so. Let’s go to the tape!
On March 20, its D-1 Quiz Bowl team was stripped of four national championships for cheating.
A day later, its D-1 basketball team won a first round NCAA game. Harvard junior Abhi Chintapalli told the Boston Globe, ‘It’s nice to finally say, “Oh, look, Harvard is on a channel that you watch.”’
But I’m told, the broadcasts reminded viewers that two of Harvard’s best players had to withdraw from school for fear of being suspended for cheating on an exam and losing a year’s NCAA eligibility.
In this light, consider Yahoo’s Dan Wetzel on March 3 discussing Harvard’s recruiting:
The all-time [college basketball] coaching rogue heard the news and couldn’t decide whether to be stunned or entertained.
“Harvard?” Jerry Tarkanian kept saying with a laugh. “Harvard’s cheating?”
So alleges The New York Times, which Sunday unveiled one of the most unlikely, telling and, at least to some of us, humorous potential college basketball scandals by bringing to light a number of questionable [recruiting] practices by no less than Harvard Basketball….
“We used to joke we were the Harvard of southern Nevada,” Tarkanian laughed of his legendary run at UNLV that featured a national title, four Final Fours and endless fights with NCAA investigators.
So maybe now Harvard is the UNLV of eastern Massachusetts. [Links added.]
The cynic in me asks: why does the WGU want to be a college basketball power? From what is it diverting attention? Does it plan to become a Jesuit round-ball school, like Georgetown, Marquette or Gonzaga?
After its roll in the mud with Russian oligarches and politicians in the 1990s, Harvard now wants to roll in the hay with the NCAA?
And then there’s the drip, drip, drip of poison from the WGU’s handling of alleged cheating in a civics course favored by athletes.
The details of this fiasco defy summary, but it is at least probable the students were victims of an inexperienced junior professor whom Harvard decided it had to back up.
The exam took place last May. In August the story broke when an administrator leaked a document describing how Harvard would handle the student prosecutions. A number of varsity football, basketball and hockey players then dropped out to preserve their NCAA-defined eligibility. About 70 others, a Harvard disciplinary tribunal forced to withdraw last fall.
Over the winter, Harvard revealed it had searched the emails of its 20 or so resident deans to learn who had leaked. As the employer of untenured administrators, WGU was within its rights here. But how smart was it to exercise them?
What’s unquestionable is the botch Harvard made of revealing its searches.
According to the Boston Globe, Harvard’s president, Drew Faust, told a faculty meeting on April 2, ‘different choices should have been made’. The recipient of the Parkman and the Bancroft prizes for her historical writings on the Civil War, one might assume she knew how to take and assign responsibility.
At the same faculty meeting, Evelynn Hammonds, Dean of the College (the undergraduate school) admitted she’d authorized more – and more comprehensive – email searches than she’d disclosed.
Although I consulted with legal counsel, I did not inform [Faculty of Arts & Sciences] Dean [Michael D.] Smith about the two additional queries. This was a mistake. I also regret the inaccuracies in our March 11 communication resulting from my failure to recollect the additional searches at the time of that communication.
Two days after the faculty meeting came an extraordinary Crimson editorial:
Dean of the College Evelynn M. Hammonds’s admission that she ordered two … previously unreported searches of a resident dean’s email accounts comes as shocking, disappointing, and disheartening news…. Hammonds not only authorized the second round of searches without necessary permission of … Dean … Smith but also made a false statement to the press in which she and Smith said no additional searches had taken place. Nearly a year after the now-infamous Government 1310: “Introduction to Congress” final exam took place, the University community continues to receive news of missteps…. For the good of the University, Hammonds must resign.
…Yet the inescapable fact is that Hammonds ordered two email searches—searches which are said to be conducted “very, very rarely”—and then “fail[ed] to recollect” her own, highly unusual authorization at the time of her March 11 statement on the first round of searches in March. After those searches, she inexplicably circumvented the requirement that Smith approve faculty email searches, and then promptly forgot about it….
Harvard received its corporate charter in 1650. Its mission: ‘the education of the English and Indian youth of this country, in knowledge and godliness….’ Its website asserts, ‘Harvard continues to operate under the authority of the 1650 charter to this day.’ Ah, but the mission….
Fifty years earlier, in 1600, the Crown had chartered the first modern for-profit, the East India Company. Two hundred and seventy-four years later, the Crown dissolved the Company which had brought England its Indian empire and in the process defined much of corporate law as we know it.
In its three hundred and sixty-three years, Harvard has had a similar effect on the US. It has defined education as we know it – from its undergraduate curriculum to its innovations in business and legal education. In cases such as Harvard College v. Amory, (which it fortunately lost), it has shaped the American law of fiduciary duties.
Like the East India company in its final century, Harvard no longer can manage the empire it has haphazardly created. For the past 20 years, at least, it has stumbled around the groves of academe like a drunken Paul Bunyan.
Before it does further damage to its constituent parts and to the state that chartered it and to the nation it grew up with, the WGU should be divided into manageable companies. It must focus as never before on its education business.
Break up Harvard!
1. Joseph Schumpeter, Capitalism, Socialism and Democracy (New York: Harper & Bros., 1942), p. 83, as quoted in Thomas K. McCraw, Prophet of Innovation: Joseph Schumpeter & Creative Destruction  (Cambridge, Mass.: Belknap/Harvard Univ. Press, 2009), p. 3.
2. Shira Springer, ‘Crimson Pride’, Boston Globe, Mar. 23, 2013, p. B1.
3. Mary Carmichael & Peter Schworm, ‘Harvard’s “regret” grows’, Boston Globe, April 3, 2013, p. B1. The Globe acknowledged it had not attended the meeting, so the quotation may be suspect.
4. Id., pp. B1, B4.
5. This is a grossly inadequate summary of the most important UK or American corporation between 1600 and 1850. Ditto, the following description of Harvard.